Lafontaine's comments mark a stunning U-turn for the high profile left wing politician who was Germany’s finance minister when the euro was launched at the start of 1999.

He was labelled Europe’s most dangerous man by the Sun newspaper after he called for a ‘united Europe’ and the ‘end of the nation state’ in 1998.

But the unravelling crisis in the eurozone has caused Lafontaine, who survived an assassination attempt while running for Chancellor in 1990, to change his tune.

'Is this the most dangerous man in Europe'? Lafontaine was given this title by The Sun in 1998, as it printed a version of its front page on page three written in German

Lafontaine told the website of Germany’s Left Party that the single currency needed to be broken up to enable bailed out countries forced to make austerity cuts to recover. These include Greece, Portugal, Spain and Cyprus.

He said: ‘The economic situation is worsening from month to month and unemployment has reached a level that puts democratic structures ever more in doubt. The Germans have not yet realised that Southern Europe, including France, will be forced by their current misery to fight back against German hegemony sooner rather than later.’

He added that Germany’s chancellor Angela Merkel ‘will awake from her self righteous slumber’ once the countries in trouble unite to force a change in crisis policy at Germany’s expense.’

In a final admission that the single currency had failed, Lafontaine said: ‘Hopes that the creation of the euro would force rational economic behaviour on all sides were in vain.’

With Greece mired in recession, unemployment in some countries running at more than 25 per cent, and France being given more time to cut its budget deficit, there is growing pressure on Merkel and other hardliners to focus on growth and job creation, not on austerity.

But the comments from Lafontaine come amid growing evidence that the crisis is taking its toll on the German economy, as it slammed into reverse for the first time since November.

Closely watched data from research company Markit showed new orders in April for the country’s manufacturing industry declined at the fastest pace in five months.

Output for its services industry - which covers everything from banks to hotels - also contracted for the first time since November, following the steepest drop in orders for six months.

Official figures show Germany’s economy shrank by 0.5 per cent in the final three months of last year.

Predictions: Lafontaine said Germany's chancellor Angela Merkel 'will awake from her self righteous slumber' once the countries in trouble unite to foce a change in crisis policy at Germany's expense

David Buik, a veteran City commentator at stockbroker Panmure Gordon, said: ‘Germany can’t continue to be the Charles Atlas of Europe and prop of its incompetent neighbours in perpetuity. It’s insane. I think we will see a weakening of the euro over the next few weeks.’

There were more grim figures elsewhere in Europe as Italy’s national statistics agency yesterday predicted the country’s economy will shrink by 1.4 per cent this year,

It forecast that Italy will post 0.7 per cent growth in 2014, but added that unemployment will reach a record high of 12.3 per cent next year.

'Bureaucratic monstrosity': Lord Lawson says the EU has served its purpose and Britain should now withdraw

The European Central Bank last week slashed interest rates from 0.75 per cent to a new record low of 0.5 per cent in a desperate bid to kickstart recovery.

The move followed weeks of deterioration in the eurozone including a surge in unemployment to an all-time high of more than 19.2million – 12.1 per cent of the workforce.

The latest data from Markit showed overall output contracted in the four largest euro nations, Germany, Spain, France and Italy.

Greece was yesterday told by the International Monetary Fund to do more to fight its ‘notorious’ tax evasion and open up labor competition to ensure the burden of austerity does not fall disproportionately on wage-earners and pensioners.

Measures to cut Greece’s budget deficit and make its economy more competitive are key conditions of its £200billion bailout from the European Union and the IMF.